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Rethinking The Value Of Medical Services

One of American politics’ most disingenuous conceits is that health care must cost what we currently pay. Another is that the only way to make it cost less is to deny care. It has been in industry executives’ financial interests to perpetuate these myths, but most will acknowledge privately that the way we value and pay for medical services is a deep root of America’s health care cost explosion.

When the Resource-Based Relative Value Scale (RBRVS) became the framework for Medicare payment nearly twenty years ago, it equated a medical service’s “value” with four categories of physician work inputs: time, mental effort and judgment, technical skill and physical effort, and psychological stress. The assessment process, handled from the outset by the American Medical Association’s (AMA) secretive, specialist-dominated Relative Value Scale Update Committee (RUC), delineates and quantifies a service’s inputs in terms of its Relative Value Units (RVUs) which, with a monetary multiplier, define its worth.

In 1989, RBRVS’ lead architect, William Hsaio, confidently suggested that the process would be rational and reliable:

We found that physicians can rate the relative amount of work of the services within their specialty directly, taking into account all the dimensions of work. Moreover, these ratings are highly reproducible, consistent, and therefore probably valid.

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